CHLA’s Action Plan recommends:
- The GSE Profit Sweep Should End – Treasury should put profits into a Capitalization Reserve Account, to both provide a short-term loss reserve and a long-term capital source to ensure the GSEs’ continued critical role as a reliable Cash Window for smaller lenders.
- Congress should direct the FHFA to develop a plan to show how the GSEs could be recapitalized, and whether it recommends doing so.
- GSEs Should Control “Up-Front” Risk Sharing Pilots, with protections against market concentration, including bans on volume discounts and bans on securities firms doing risk sharing MBS from dealing preferentially with bank affiliates.
- FHFA should complete work on a Common Securitization Platform (CSP) & Single Security – but should not turn over the CSP (developed at taxpayer expense) to Too-Big-To-Fail bank/securities firms.
- The Federal Home Loan Banks should not use an explicit or implied taxpayer guarantee for MBS unless all mortgage lenders, including non-banks, can participate on a non-discriminatory basis.
CHLA reflects concerns that proposals to turn the Common Securitization Plan over to private firms or let banks use “up-front” risk sharing in an anti-competitive manner risks a return to the same big bank practices that led to the housing crisis.
“Consumers’ access to credit is best served by a competitive mortgage market, with full participation by non-banks and small banks,” Olson said. “CHLA agrees that Fannie and Freddie should be reformed to protect taxpayers – but they should also maintain their key role as a cash window and should be in control of obtaining risk sharing to avoid the big banks controlling the market.”
The plan also suggests that Congress direct FHFA to present a GSE Recapitalization Plan to Congress no later than September 6, 2016, the 8-year anniversary of the conservatorship of Fannie Mae and Freddie Mac.